Illinois Legislature OKs Chicago pension overhaul

JOHN O'CONNORApril 8, 2014

SPRINGFIELD, Ill. (AP) — State lawmakers on Tuesday approved Chicago Mayor Rahm Emanuel’s proposal for overhauling two city pension programs that officials say could otherwise be out of money in little more than a decade.

The Senate voted 31-23 in favor of the Democratic mayor’s initiative shortly after the House backed it 73-41. The measure, which hinges on a $750 million property-tax increase over five years, now goes to Gov. Pat Quinn, who has been noncommittal.

Resistance to the plan dissolved Monday night after House Speaker Michael Madigan, also a Chicago Democrat, removed language that mentioned the property-tax increase. Madigan’s spokesman said his intent was to ensure that in the future, the earmarked revenue would not be diverted from paying down a $9.4 billion deficit over 40 years in the two funds, which cover 57,000 employees and retirees in the municipal workers and laborers’ retirement accounts.

The original wording had made lawmakers skittish, fearing that a vote for a bill that even mentioned the tax hike would point fingers of blame at them. Excising that phrasing brought “aye” votes from 23 House Republicans, who noted the distasteful vote but said it was necessary.

Senate Republicans remained stubborn, asking why the city isn’t presenting solutions for all five of its underfunded pension programs.

“What is the plan for coming up with the revenue to solve the totality of Chicago’s pension problems rather than doing it on a piecemeal basis?” asked Sen. Matt Murphy, a Palatine Republican.

Emanuel acknowledged there is still work to be done, but said the Legislature’s approval Tuesday was a critical step toward keeping the retirement funds from insolvency.

“For the sake of the city we have asked a lot of our residents, our employees, and our retirees to accept change. And that’s never easy,” he said after the final vote. “I believe that the certainty we are now providing will make the change worth it.”

Emanuel says he negotiated the municipal and laborers deal with affected union representatives. Chicago has the worst-funded pension systems of any major U.S. city, and officials have yet to address $10 billion in unfunded liability for police and fire retirees and $7 billion for teacher pensions.

“This is unpleasant,” said Democratic Sen. Don Harmon of Oak Park, “but we’re saving the state, we’re saving the city, and most importantly, I truly believe we are saving pensions for the folks to whom we have promised them, the folks who are relying on them, the folks sitting at home nervous that we’re going to take them away.”

Quinn did not promise he would sign the bill now that the tax language was gone, but told reporters Tuesday, “They got the message yesterday that that provision in the bill was not the way to go, and I’m glad they recognized that.”

The governor is making property tax relief a thrust of his budget plan in this election year.

Quinn also suggested that the Chicago City Council could look for other ways of funding the plan, such as by closing corporate tax loopholes.

The group of union organizations known as We are One Chicago characterized the measure as “another attempt at pension theft,” and called on Quinn to veto what it said in a statement was an unconstitutional reduction in promised benefits. That is the thrust of a lawsuit against the plan to deal with a $100 billion state-pension deficit, signed into law by Quinn last year, that in part reduces benefits and requires increased employee contributions.

Emanuel’s plan requires not only more money from the city, but from employees. Workers who contributed 8.5 percent of their paychecks now would see that amount increase to 11.5 percent by 2019 and stay there until the system has 90 percent of what it needs to cover promised benefits.

And workers would receive less. The annual cost-of-living adjustments would fall from 3 percent a year, compounded, to a straight benefit of half the rate of inflation, or 3 percent, whichever is less.